1. finance

Home Finance Review Questions
1.
Chris buys a house in Carman for $225 000. The bank offers him a mortgage interest
rate of 4.75% amortized over 25 years.
a)
Chris makes a 10% down payment. Calculate the amount that Chris needs to
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borrow from the bank for his mortgage.
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b)
Calculate the monthly mortgage payment.
Amortization Period of Mortgage
Loan
rtgage
Loan
and in
terest per
landed payment of principal
Interest Rate
4.00%
4.25%
4.50%
="--? 4.75%
5.00%
5 25%
5.50%
2.
years
$18.40
18.51
18.62
18.74
18.85
18.96
19.07
10 years
15 y
$10.11
10.23
10.34
10.46
10.58
10.70
10.82
57.38
7.50
7.63
7.75
7.88
8.01
8.14
monthly
of loan)
20 years
yea
$6.04
6.17
6.30
6.44
6,57
6.71
6,84
$5.26
5.40
5.5$,
.67
5.82
5.96
6.10
State two factors that may increase or decrease a homeowner's insurance premium.
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Home Finance Review Questions
3.
Describe 2 energy-efficient upgrades that are available to homeowners.
4.
A home has a portioned assessment of $160 000 and a frontage of 50 feet. The
municipal tax rate is 23.01 mills. The education taxes are $1171.20. Local sewer
improvements are assessed at $6 per foot. Calculate the total taxes due if the provincial
property tax credit is $750.
Use the form on the next page if you like but write your answer below:
2
Home Finance Review Questions
3
STATEMENT AND DEMAND POR TAXES
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PROPERTYDESCRIPTION.
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MUNICIPAL
TAXES
EDUCATIONAL
TAXES
PROVINCIAL
TAX CREDITS
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Home Finance Review Questions
5.
4
Explain why the insurance premium would be lower for tenant's insurance rather than
homeowner's insurance for the same property.
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6.
Explain three types of additional (one-time) costs to consider when initially purchasing a
home. Do not include the down payment or mortgage payment.
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5
Home Finance Review Questions
7.
A new homeowner has the following costs:
1
Monthly heating
Mortgage
$250
Land transfer tax
Home insurance
Property
5200
adjustment
$ 200
Property tax
Identify a one-time (or additional) cost from the above list.
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8.
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a
,
IC
Complete the following amortization table by filling in the empty boxes.
Date
Payment
Interest
Principal
Unpaid Balance
April 15
$789.00
$50000
$289.00
$149711.00
May 15
$789.00
$499.04
June 15
July
00
$49807
)
$149 421.04
$290.93
ii%'
$291.90
$14883821
Home Finance Review Questions
9.
6
The monthly heating payment for a home is $250.
a)
State the homeowner's heating costs for 5 years.
b)
If the homeowner installs new windows, it will reduce the heating costs by 30%.
Calculate the homeowner's expected heating costs for 5 years if new windows
are installed.
k
c)
ye-
6, 3L)
The total cost for the windows is $12 000. Explain whether replacing the
windows is a good financial decision.
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Home Finance Review Questions
10.
7
A couple has chosen a house to purchase. The bank calculates the couple's Gross Debt
Service Ratio (GDSR) to be 40%. State two ways the couple could decrease their GDSR.
on-tu
S
11.
Homeowners pay a Land Transfer Tax when purchasing a property. This tax is calculated
as follows:
Value of Property
On the
0 000
Rate
0%
Onthenext$60000
001 to $90 000)
On tie next $60 000
(1,e„ $90 001 to $150 000)
1,0%
Onthenext$50000
1 to $200 000)
(Le,
On amounts hi excess of $200 000
2,0%
Calculate the Land Transfer Tax due on a property valued at $90 000.
Home Finance Review Questions
12.
8
State two benefits of owning a house and two benefits of renting a property assuming
the monthly payments are the same.
1,
1,
C
2,
13.
Carrie is thinking of purchasing a house. The monthly mortgage payment, heating cost,
and property tax would be $836.25, $150, and $135, respectively. Carrie has a gross
monthly income of $2800.
a)
Determine Carrie's Gross Debt Service Ratio (GDSR).
4
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b)
1 /:4 6
a
Explain whether Carrie can afford to purchase this house.
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9
Home Finance Review Questions
Determine the monthly payment for a mortgage of $235 000 at an interest rate of 4%
14.
for a period of 25 years.
Amortization Period of Mortgage Loan When Paid Monthly
Amortization Period of Mortgage Loan
(Blended payment of principal and interest per $1000 of loan)
Interest Rate
4.00%
4,25%
4,50%
4,75%
5.00%
5.25%
5.50%
5,75%
6.00%
6.25%
6,50%
6,75%
7,00%
7.25%
7,50%
7,75%
8.00%
15.
5 years
$18.40
18.51
2
18,74
18.85
18,96
19.07
19,19
19.30
19,41
19,53
19,64
19,75
19.87
19,98
20,10
20.21
10 years
$10.11
10.23
10,34
10,46
10,58
10.70
10,82
10,94
11,07
11.19
11.31
11,43
11.56
11.68
11,81
11,94
12,06
15 years
$7.38
7.50
7,63
7,75
7.88
8.01
8.14
827
8.40
833
8,66
8,80
8.93
9.07
921
9,34
9.48
State two (2) examples of emergency home repair costs.
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20 years
$B.04
6.17
6,30
6.44
6.57
6.71
6.84
6,98
7,12
726
7,41
7,55
7
7.84
7.99
8,13
8.28
25 years
$5.26
5.40
5,53
5.67
5.82
5.96
6.10
6,25
6,40
6.55
6,70
6,85
7,00
7.16
7,32
7,47
7.63
Home Finance Review Questions
16.
10
Calculate the total cost of insurance for a house valued at $250 000 with comprehensive
insurance in Area 3 and a $500 deductible.
Use the Manitoba Homeowner's Insurance Rates table below:
Manitoba lie e
r's I nsurance Rates ($500 deductible)
Msnftoba Hom
INInnipeg
390
S110 000
11
432
410
436
451
4 72
493
523
11.55003:
51.63000
$155000.
5173 003
$175000
$160 003
1160000
51.95000
5200 000
Mahood
Amami'
per 51000
canner
557
565
590
62fl
214
238
26d
277
303
314
323
123
34t
374
393
417
441
464
48r
510
543
557
576
604
613
322
ma
547
652
arm
SR
586
7112
717
742
171
53,15
13.50
147
16
173
1$?
200
210
221
226
231
244
2133
215
203
"44 ggi"
SluOooG
sun acc
51
1
S130 0011
5135 000
S143 01X1
4
Area 4
Standard Cora pr•bonsin Standard Cormanthanalva Standard CornpStnjn Standard
lOS
216
237
252
268
29
310
3t
324
343
354
S 55C04
S 90 COD•
05000
Area 3
sP40
S 53 1
3 55000
$ 5000*
S 65 ZOO
5 70DO
$ 75 OM)
Area 2
196
217
237
239
261
255
751
270
297
zas
31
332
244
356
360
3117
415
422
653
670
UK
713
734
775
792
709
Acd.,
$3.91
492
504
519
3 UrittaM. ti ElMgg 4
Amount
r's Insursuce Rates
302
311
324
345
36'
376
393
400
424
444
463
477
496
.508
520
5
569
539
509
524
548
657
705
720
226
Add:
72.75
$33
$3.05
110
339
345
375
393
411
45
441
451
466
$200 deductib
4- 5 0
Cl
216
455
488
513
525
646
559
5fl
606
cza
premium by 107.
241
2118
31S
237
318
347
339
359
In
402
4"17
4,31
.459
430
523
523
544
564
501
620
034
650
676
692
733
757
783
402
395
47
.474
506
523
553
575
595
520
693
692
697
72$5
744
761
306
333
/761
610
*30
862
891
17117
938
956
966
975
1032
1054
ton
14,77
Add
15.19
946
Home Finance Review Questions
17.
A property has a portioned assessment of $120 000 and has 60 feet of frontage. The
municipal mill rate is 13.01 mills. There is a special lighting levy of $3.50 per foot of
frontage. Education taxes are $1903.20 and there is a Provincial Property Tax Credit of
$750. Calculate the total taxes due for this property.
All calculations and answers must appear on this page. The Statement and Demand for
Taxes on the facing page is provided for rough work only.
11
12
Home Finance Review Questions
STATEMENT AND DEMAND FOR TAXES
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PR
SScczttt
EiMORS Pia OvIssION$
EXCEPI ED
311473343
Pinctler- F.cntaq&Ana ageoll. 1-frits. •Att LAND% ARREARS
FOR MQflff IMAN OW YEAR
SMALL OE SOLO FOR WES
3 AVE ClIFOILS 3.040E IN
CM1P,C4M41 FUNDS
-ntros
Pcnwi
"kW Poo +8ANIC RECEFF CON-571FOFES
Irbil
P100/
Astasiwet OPPIC Itt- PT
Code„
Alest-m-mr4 1-43s33 PETA1N COPY FOR 1NC0110
TAX PURrarS
4
CRIPTION -
ASSES-WEST
stialecr '74:1 Lora&
IMP liastEMFNT
LEVY-
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Assmemon1
tiscawsp
MUNP1P At
terr
Gem"'
Twe,
FtatMika&
TAXES
vaki j'rrt
EDUCATIONAL
TAXES
PROVINCIAL
TAX
I
CftEDITS
Provital Educamar, 1
Pravi*ViEducttP32
Scmi Cramp in
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TOTAL Taxes
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13
Home Finance Review Questions
18.
Dan would like to move out of his parents' house. He can afford $700 per month, either
for a monthly rent payment or for a monthly mortgage payment. State two (2) reasons
why he should rent, rather than purchase, a place to live such as an apartment or a
house.
19.
State two (2) reasons why a homeowner would spend money on preventative
maintenance.
20.
Homeowners must pay a Land Transfer Tax when purchasing a property. This tax is
calculated as follows:
Value of Property
Rate
On the first fla 000
0%
On the next 1160 OM
(Lei S30 001 to $90 000)
On the next 360 000
(Le. $90 001 to $150 000)
1.0%
On the next $50 000
0.e. 3150 00110 S200 000)
1,5%
On amounts in
00
Calculate the Land Transfer Tax due on a property valued a
0
Home Finance Review Questions
21.
14
State four (4) ongoing or daily expenses of maintaining a house. Choose from the list of
expenses below.
I.,
yer's fees
Down payment
Mortgage payment
Yard care 1.77.--
Interest adjustment
Movers
Insurance yZ
Utilities
Property tax
4.
‘,/
A couple owns an older house and they would like to reduce their expenses. State two
(2) things they could do to reduce their monthly heating costs.
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22.
Calculate the monthly payment for a mortgage of$120 000, amortized over 15 years at a
rate of 4% interest per year.
Amortization Period of Mortgage Loan When Paid Monthly
Amortization Period of Mortgage Loan
(Blended payment of principal and interest per $1000 of loan)
Interest Rate
4.00%
4.25%
4,50%
4,75%
5.00%
5.25%
5.50%
5,75%
6.00x
8.25%
6.50%
6.75%
7.00%
7.25%
7.50%
7,75%
8,00%
s years
818.40
18.51
18,62
18,74
18.85
18,96
19.07
19,19
19.30
19,41
19.53
19.64
19.75
19.87
19.98
20,10
20 21
10 years
810.11
1023
10,34
10,46
10.58
10.70
10.82
10,94
11.07
11.19
11.31
11,43
11,56
11,68
11,81
11,404
12,06
15 years
20 years
,
_
7.50
7.63
7,75
7.88
8.01
8.14
827
8.40
8.53
8,66
8,80
893
9.07
921
9,34
9.48
5664
6,17
6,30
6,44
6.57
6.71
6.84
6.98
7.12
7.26
7.41
7,55
7,70
7.84
7.99
8,13
826
25 years
55,26
540
5,53
5,67
5.82
5.98
6.10
6,25
6.40
6.55
6,70
6,85
7.00
7.16
7.32
7,47
7.63
15
Home Finance Review Questions
24.
A portion of Joe's monthly mortgap ayment goes towards interest. Jop wond rs how
—
I
much interest he will pay over the life the mortgage•
b.
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a
a
Explain how Joe can calculate this amount.
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25.
t t
fry
4
cit"
List two (2) types of additional or one-time costs to consider when initially purchasing a
home. Do not include the down payment or mortgage payment. Explain these costs.
Additional Costs
Explanations
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Home Finance Review Questions
26.
16
Jared is moving away from home and must decide where to live. There are various
benefits to owning a house or renting a property. State two (2) benefits of owning a
house and two (2) benefits of renting a property. You may choose from the following
list:
Equity
no maintenance costs
lower insurance cost
easier to renovate
no property taxes
acts as an investment
Benefits of owning a house
Benefits of renting a property
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2.
\
27.
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Describe two (2) ways people can decrease their Gross Debt Service Ratio (GDSR).
4;
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17
Home Finance Review Questions
28.
175 000. Tire couple also plans on
A couple purchased a house in Winnipeg va ued-a6_ _. __...e.Calculafe the cost of insuring this house
buying comprehensive homeowner's
$200 ded 'ctible.
if the purchasers choose a policy w
Use the Manitoba Homeowner Insurance Rates table found elsewhere in this booklet.
4-)
29.
Juan's property has a total assessed value of$150 000. The portioned percentage on his
property is 45%.
a)
Calculate the portioned assessment of the property.
'LT
LO 1
The municipal tax rate is 12.5 mills. The amount of school division tax due is
$1 451.25. The provincial tax credit this year is $775. Calculate Juan's total
property tax bill for this year.
The Statement and Demand for Taxes on the facing page is provided for rough work
only. All calculations and answers must appear on this page.
18
Home Finance Review Questions
STATEMENT AND DEMAND FOR TAXES
PRQPERTY DESCRIPTION
iltin
tio4 ults.
.?itrop.
C"ovil
Ceds
13V4
* NL
Trial
Assatmeot
Pca
c
TOM Pert
Assessment
RRORLflC o14ssIoM
r
PaLJINu IN tfiRkARS
L E
AUCI-eZk5I
FUNDS
E COKR MTUTES
IC
FOR IN COW
p
I
AsstSWEV
SUBJECT -0 LOCA.IMPROVEMENT
LEVY.
MO
hit.INICIPAL
TAXES
I
Let-
Gen_
.
e..
.
-rei Pitt
Assessmmt
EDUCATIONAL
TAXES
mo Aar.
mil
.
Rate
d
T
PROVINCIAL
TAX CREDITS
M
CaA
In
Inturnesen
TOTAL TAXES
MutttaIT*.
Tong Then.
r.
kerma,
Taxes Cue